Whats next after the jamboree on the ease of business?
The new index on the ease of doing business in Nigeria had shown that the Nigerian government is indeed committed to addressing challenges revolving around businesses. But before we jubilate lets take note of the following
- Doing Business does not measure all aspects of the business environment that matter to firm or investors, such as the macroeconomic conditions, or the level of employment, corruption, stability or poverty, in every country.
- Doing Business does not consider the strengths and weakness neither of the global financial system, nor the financial system of every country. It also doesn’t consider the state of the finances of the government of every country.
- Doing Business does not cover all the regulation, or all the regulatory requirements. Other types of regulation such as financial market, environment, or intellectual property regulations that are relevant for the private sector are not considered.
The Doing Business report is not intended as a complete assessment of competitiveness or of the business environment of a country and should rather be considered as a proxy of the regulatory framework faced by the private sector in a country.
Since taking office, president Buhari had taken up the challenge of easing the hurdles of doing business in Nigeria. In October 2016, in the middle of a recession and looking to spur growth, the president set up a council — Presidential Enabling Business Environment Council (PEBEC), chaired by Vice President Osinbajo, with the president’s senior special assistant on industry, trade and investment, Jumoke Oduwole, as secretary (PEBEC) focused solely on improving the ease of doing business in Nigeria. The council’s mandate was simple: improve Nigeria’s ranking on the World Bank’s annual Doing Business report by 20 places.
PEBEC brings together heads of key MDAs to tackle regulatory impediments to doing business in Nigeria.
But how? Well, this is where rules come in. From the “60-day national plan” to the executive order, both aimed at the ease of doing business, the government introduced rules to implement some regulatory reforms. The passage of two laws, the Secured Transactions in Movable Assets Act and the Credit Reporting Act, was also crucial in driving forward the agenda. The last element, a critical mass of informed citizens, is often the hardest to secure. But, surely, Nigeria would not have improved its ranking on the Doing Business index without the MDAs and their staff playing a pivotal role in it.
So, then, the combination of leadership, institutions, rules and a critical mass of informed public servants produced the reforms behind Nigeria’s Doing Business achievements. But what are these achievements? Well, to reiterate, Nigeria has moved up 24 places from 169th last year to 145th this year, and it is one of the 10 most improved economies.
PEBEC’s reforms have included relaxing visa entry rules for foreigners. The immigration service has opened additional offices across the country to enable foreigners obtain residence permits more easily. There have been reforms at local ports to ease bureaucracy bottlenecks and boost transparency. The council has also tackled difficulties associated with starting and registering businesses locally: Nigerians can now register businesses online without engaging middlemen (typically lawyers) at a lower cost than a year ago.
The latest Doing Business report shows PEBEC surpassed that target as Nigeria now ranks 145th out of 190 countries — a 24-place rise compared to last year. The report also ranks Nigeria among the top 10 most improved economies globally in terms of doing business.
The reality on ground..
Here is an excerpt from an article on quartz.
Access to credit, especially through banks, remains difficult. Dele Omopariola, a Lagos-based fashion entrepreneur, says he depends on loans from family and friends to expand his four-year old business because “commercial interest rates are not appealing.”
Businesses still face the risk of being buried under the weight of multiple taxes and levies from rent-seeking local and state government agencies. Back in March, the association of hotel owners in Abuja, Nigeria’s capital, complained of multiple taxes and levies which “could force them out of business.” One of the levies charged was a “bicycle and cart levy” pegged at $700 annually.
Even Nigeria’s tech-led startups, often seen as the bright future of Nigerian enterprise aren’t left out from the mundane, expensive and at times ridiculous demands of trying to run a business in the country. Last month, Paga, a leading mobile money operator, had its offices closed by a local government agency in Lagos, for a failure to pay a “TV/radio levy.”
It is crucial, though, to note that Nigeria has not improved on its previous performance in the other five categories, namely, getting electricity, protecting minority rights, trading across borders, enforcing contracts and resolving insolvency.
Nigeria’s high score for getting credit is likely puzzling for local business owners but “the indicator is focused mostly on the legal and institutional framework behind accessing credit, not the actual accessing of credit,” says Nonso Obikili, a Lagos-based economist
Well, one seemingly obvious observation is that Nigeria has mainly improved its performance with respect to simplifying its mode of operation, ensuring transparency and facilitating access. These are hugely important, of course, but the challenges in, for instance, getting electricity, trading across borders and enforcing contracts go well beyond issues of process; they relate to substantive issues, such as costs, efficiency of service delivery, the quality of legal infrastructure, the density of regulation and enforcement.
The ease of doing business shouldn’t just be about process but also substance. To appreciate this, consider some of the areas where Nigeria has improved in this year’s index. for instance getting credit, only 0.1% of adult Nigerians are covered by credit registry. Or take registering property, Nigeria scores 8 out of 30 on the quality of land administration index, and 76 days required to register property, 2 out of 8 on reliability of infrastructure, and 0 out of 8 on geographic coverage — not to mention getting electricity, where Nigeria scores 0 out of 8 on the “reliability of supply and transparency of tariff index”, or paying taxes, where there are 59 number of payments per year, compared to an average of 37 in sub-Saharan Africa. What about trading across borders? Excessive regulation and transport costs remain huge barriers to trade. Even trade within the country can be hectic — irregular taxation from uniformed men be it the army, police,quarantine, vio and strangely the road safety officers.
Of course, there is the overarching problem of the absence of strong legal infrastructure and institutions to engender a strong market economy. In February last year, a DfID-sponsored report said “54 Nigerian laws are obsolete”. How many of these laws have been revised? And is Nigeria a good place to litigate on commercial issues? not according to many foreign investors. A report on Nigeria by the US Trade Representative (USTR) said that “the sanctity of contracts is often violated, and Nigeria’s court system for settling commercial disputes is weak and sometimes biased”. That assessment remains almost valid today. Indeed, under the enforcing contracts category of the 2018 Doing Business index, Nigeria scores 8 out of 18 on the quality of judicial process, 1 out of 6 on case management, and 0 out of 4 on court automation!
It’s also worth noting that, as the World Bank points out, the Doing Business index has a narrow scope; it doesn’t cover the wider issues affecting a nation’s competitiveness, such as the quality of the public sector, level of corruption, infrastructure development,level of literacy/education, incidence of protectionism, and commercial law regime. The fact that Nigeria ranks 125th out of 137 in the 2018 Global Competitiveness Index, and is classified in the “worst” category, shows that the reforms that earned it a 24-place rise in the Doing Business Index are not enough to improve its competitiveness.
Nigeria must aim not just to ease doing business, but also to improve the quality of its business environment and national competitiveness. This requires deeper market economy reforms. The reform agenda needs to be driven down to state and local government institutions. Reforms must move beyond the bureaucracy of doing business, and push on infrastructure, human capital, security, and other institutional improvements which are also key for competitiveness.
So, well done Nigeria for improving your Doing Business ranking, but don’t be self-satisfied more challenging works lies ahead
Here is a podcast on the history of how the ease of doing business began https://www.npr.org/sections/money/2015/01/28/381652827/episode-599-the-invisible-wall
